The Growing Cost of Wisconsin’s Drop Out Rate

MADISON – Everyone pays when someone drops out of school. That is the sobering conclusion of a study jointly released today by the Friedman Foundation for Educational Choice and the MacIver Institute for Public Policy. The newly released study details the impact dropouts have on tax revenues, Medicaid costs, and incarceration costs. All told, the report concludes that Wisconsin could save $395 million each year by improving graduation rates.

“High School dropouts dramatically impact Wisconsin’s finances,” said the study’s author, Emily House. “Each student who fails to graduate from high school produces direct costs to taxpayers through lower tax revenues and greater social costs.”

The report finds that dropouts cost the state of Wisconsin $121 million in tax revenue each year due to lower wages. Because the average dropout earns approximately $10,000 less per year than a high school graduate, the report estimates that if all the high school dropouts did graduate from high school, earnings in Wisconsin would increase by almost $4.5 billion.

“This increase in earnings could be reinvested in the Wisconsin economy, resulting in job and wage growth, as well as increased productivity and revenue from taxation,” said House.

In addition, because high school dropouts are much more likely to rely on public programs such as Medicaid, social costs are increased. Approximately 40-percent of high school dropouts receive Medicaid benefits, as opposed to about 15% of high school graduates. The difference, according to the study, is an extra $120 million each year.

Higher incarceration rates also put an added financial burden on taxpayers. Because dropouts are statistically much more likely to be incarcerated than high school graduates, the study estimates that there would be 5000 fewer inmates if Wisconsin’s graduation rate was 100 percent. Such a drop in the inmate population would save an additional $154 million in incarceration costs each year.

“While most people understand the personal consequences of dropping out of school, less emphasis has been placed on the public cost of decreasing graduation rates,” said MacIver Institute President Brett Healy. “Our hope is that once people understand the tangible costs on each taxpayer, efforts at reform can move forward.”

The author of the report, Emily House, is a Fellow with the Friedman Foundation for Education Choice, a non-profit organization established in 1996 and founded upon the ideals of Nobel Laureate economist Milton Friedman and economist Rose Friedman

The MacIver Institute is named after John K. MacIver, who was a sterling example of the public spirited citizen. The MacIver Institute is a 501 c3 charitable foundation. For more information on this research report – or to view the entire report – please click the link below.

Drop Out Study PDF